California needs to toughen up and balance the budget without hurting municipalities, public safety, or the economy. Each year the State must pass a budget by June 30th and it is the rare year that we actually pass the budget on time.
The budget is the primary instrument of policy on the state level. Yet each year the legislature is almost always late, or worse, they propose a budget that is over-optimistic that counts on revenues that will never materialize, counting on a proposed tax that the voters will surely reject, borrowing billions of dollars that will cost the state billions more in interest, new gimmicks and tricks that really disguise a poor budget. On average in the last few years, California budgets have lasted less than 8 months until a new budget tries to fix the flaws in the original budget.
California is the land of booms and busts. The defense industry boom, the high tech boom, and the real estate boom; it is the gold rush all over again. There are the busts and recessions, military downsizing and base closures, the tech bust, and the collapse of the real estate bubble followed by the foreclosure crisis. When the good times come, in California we forget the bad times. During the tech boom the state made billions in one-time taxes on capital gains. One-time revenues were spent on new ongoing programs. Worse, the good times made the retirement pension funds appear to be well funded and sustainable so contribution levels were lowered and benefits extended.
The boom / bust cycle has left California with a balanced budget only in the best of times and huge deficits in the worst of times. Borrowed money in the bad times made the good times fewer and farther between. To fix this boom / bust cycle we need decisive action.
- 1. A balanced budget amendment that limits borrowing, caps spending, and creates a true reserve fund. No great spending increases in the good years and a generous reserve in the bad years.
- 2. A 2-year budget cycle for the California's budget - California's budget is huge and very complex. For term-limited state legislators, they have a very short time to become competent on budget issues.
- 3. California's tax base is particularly susceptible to the boom and bust cycle. In the good times sales tax, property tax, and capital gains tax revenues soar. In the bad times these revenues quickly disappear. The time between good times and bad times can be very short. A healthy, well-funded reserve will provide balance and stability.
- 4. Sales tax apportionment needs to be considered and reformed. With the current way California apportions sales tax, municipalities are pitted against one another for sales tax revenue.
- 5. Reform redevelopment
- Voter approval for new districts.
- Redevelopment needs to have performance metrics.
- Redevelopment monies need to be tied to projects that promote the local economy.
- 6. Stop raiding, back filling, borrowing, and stealing from municipalities, local governments, special districts, and county government.
- 7. Redevelopment is good for California's tax base; the State of California should be enhancing redevelopment. It is good for the state, the school districts and municipalities.